Obama And The Minimum Wage

Recently, Obama made good on his pledge and took pen in hand and issued an executive action to raise the minimum wage for government workers to $10.10 an hour. Obama and the Democrats made it sound like a big deal, as if they were doing such a noble deed, when in fact, it only effects a handful of workers employed by the government. Obama’s real motive was to get the congress to pass a law raising the federal minimum wage, even though most economists agree that raising the minimum wage in a slow economy will hurt job creation.

Let me be up-front and say I am not in favor of a minimum wage, I believe the free market should dictate, for instance; most people working at McDonalds in my state of Florida are probably making the minimum wage of $7.79 an hour, while a person working at McDonalds in North Dakota is making over $17.00 an hour, where the minimum wage is $7.25 an hour. Why is there such a difference in wages between the two states? There is an old law that is known as supply and demand, which works better than any government interference.

Let’s say I have a new business, and I can really use two people to work for me, but I can only afford to pay $10.00 an hour, is it better to hire two people at $5.00 an hour, or hire one person and leave the other person without a job? I am sure this can be debated for hours and both sides can bring up valid points, but the bottom line is this, one person is without a job. So, what happens when there is a minimum wage? There are some jobs that are only worth a certain amount of money. I don’t think it’s worth paying somebody $15 an hour to come and sweep the floors, it’s just not worth it for me to pay that kind of money, so I wind up doing it myself and another person is out of work.

According to the model shown in nearly all introductory textbooks on economics, increasing the minimum wage decreases the employment of minimum-wage workers. One such textbook says:

If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. The direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. This is known as the “ripple effect”. The ripple effect shows that when you increase the minimum wage the wages of all others will consequently increase due the need for relativity. Others, particularly those with the lowest prelegislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed or out of the labor force. Some argue that by increasing the federal minimum wage, however, the economy will be adversely affected due to small businesses not being able to keep up with the need to subsequently increase all workers wages.

Obama does not seem to understand, he can raise the minimum wage to $30.00 an hour, but if there are no jobs, what good does it do? Obama and the Democrats love to expand government give away programs and raise the minimum wage, but one thing they do not seem to comprehend; we need jobs in this country, why don’t they focus on that?

It is easy to see what is coming down the road, technology is advancing so fast that machines are doing things better, faster and cheaper than a human can; it is going to get to the point that wages are going to get too high for an employer to afford, so they will all lose their jobs and be replaced by machines, many jobs are already being shipped overseas because of labor costs.

You know, I remember seeing that in all the science fiction movies, men being replaced by machines, but it won’t be fiction for long.

As I was writing this, Glenn Beck had something interesting to say about the minimum wage. See here.